Last week we discussed the hierarchy of some key association governing documents. This week we will focus on another document that governs associations: the Articles of Incorporation. The Articles of Incorporation is typically a streamlined document, but one that provides significant protection to your directors and homeowners. 

Condominium associations in both Washington and Oregon are required to be organized as corporations (profit or nonprofit) pursuant to RCW 64.34.300 and ORS 100.405. In Oregon, planned communities (HOA’s) are required to be organized as nonprofit corporations under ORS 94.625. There is no statutory requirement for organizing as a corporation in the HOA Act in Washington.

In order to form a corporation in either state, the incorporator files Articles of Incorporation with the Secretary of State and pays a small fee. In Oregon, the specifics for the document’s contents are set forth at ORS 65.047, and in Washington at RCW 24.03.025 for nonprofit corporations. Some general requirements common to both states are inclusion of a corporate name, the purpose for which the corporation is formed, and the name and address of a registered agent. 

Although not mandatory, both states allow provisions limiting the personal liability of directors. The Articles of Incorporation also frequently include indemnity provisions requiring the association to indemnify directors and officers for liability incurred while acting within the scope of their authority. These corporate protections are vital for community associations. Without these protections, board members could be held personally liable for actions performed as volunteers on behalf of their associations, which would drastically diminish the number of people willing to serve on the board of directors. 

Once the Articles of Incorporation are filed, the association has ongoing obligations to pay nominal annual fees and to file annual reports. The annual reports are simple forms that are available on the Secretary of State’s website. Failure to pay fees or file annual reports can lead to administrative dissolution. If an association is administratively dissolved, it will continue to operate as an unincorporated entity with none of the corporate protections.   Although corporate renewal is very simple, the simplicity often increases the likelihood that these minor tasks get overlooked, unnecessarily exposing owners and directors to personal liability. 

We encourage associations to use this email as a reminder to check the Secretary of State’s website to ensure your association is properly incorporated and all of the information is up to date. It is a quick and easy way to protect your association and its members.